Cayman Islands: New Revision Of Trusts Legislation In Cayman

The Trusts Law (2017 Revision) (2017
Revision) was gazetted on 31 May 2017. The 2017
Revision is the first full revision of the Cayman Islands Trusts
Law since its 2011 Revision (2011
Revision) and incorporates the Trusts (Amendment) Law
2016 (Amendment Law) which amended and
modernised the 2011 Revision.

Along with provisions addressing certain powers and the
appointment and discharge of trustees, the Amendment Law introduced
a number of retrospective provisions with the objective of
correcting technical issues in the original legislation.

Trustees

Under the 2011 Revision, a trustee who was absent from the
Cayman Islands for more than 12 months could have been discharged
and replaced. The Amendment Law removed this provision. This was
welcomed by the industry given that many trustees of Cayman law
trusts are based in other financial centres, such as Switzerland,
Singapore and Hong Kong.

Additionally, the Amendment Law addressed technical issues
concerning the proper discharge of trustees which arose as a result
of transitional provisions from 1998. Those provisions applied to
trusts created on or after 11 May 1998 or if the specific section
had been applied to a trust by express extension by the trustee.
The consolidating legislation after 1998 did not preserve the
pre/post 11 May 1998 distinction and the Amendment Law corrected
this issue by amending section 6(c) to contain specific reference
to trusts established on or after 11 May 1998. Section 8 of the
2011 Revision has also been amended to cover the position where
there is a retirement of a trustee with no simultaneous appointment
of a new trustee. The position is therefore the same irrespective
of whether a new trustee takes office or not on the retirement of
an incumbent trustee.

STAR Trusts

The Amendment Law clarified that controlled subsidiaries (under
section 5 of the Banks and Trust Companies Law (2013 Revision)) can
be trustees of STAR Trusts and that this has been the case since 7
August 2008. Accordingly, to satisfy one of the conditions of the
STAR regime, one of the trustees must be a Cayman licenced trust
company, a Cayman Private Trust Company or a controlled
subsidiary.

Reserved powers

Section 14 of the 2017 Revision now allows a settlor to reserve
to himself, or a third party, power to appoint both capital and
income from a trust. This power can be included in any Cayman trust
irrespective of when it was established and will add flexibility to
settlors who wish to retain strategic control over distributions
from a trust.

Other trustee powers

The Amendment Law extended the adverse events against which a
trustee is authorised to insure trust property.

Charitable purposes

The scope of the objects of charitable trusts was extended by
the Amendment Law. This amendment is retroactive and so applies to
all charitable trusts whenever created.

Conclusion

Overall, the changes incorporated in the 2017 Revision do not
represent a major development in trusts law in Cayman; however the
2017 Revision maintains the Cayman Islands' commitment to being
at the forefront of pioneering and accessible offshore trusts
legislation and ensures that it remains a leading jurisdiction for
all forms of trust structures, both in the private client and
commercial contexts.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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